Canadian Tire Closing National Sports Stores Despite a Profitable Fourth Quarter

Canadian Tire Corp. Ltd. says it’s closing all 18 National Sports stores to reduce overlap in the company’s sporting goods assortment after an internal evaluation. The decision came as the company reported its fourth-quarter profit and revenue both rose significantly compared with a year ago.

“This has been a difficult decision, particularly due to its impact on people,” Gregory Craig, the company’s chief financial officer, said on February 18. “We’re making every effort to place affected employees within our family of companies.” The company operates multiple brands including Canadian Tire, Mark’s, SportChek, Atmosphere, Sports Experts and Pro Hockey Life.

Greg Hicks, president and CEO of Canadian Tire Corp., told investors that the company’s fourth-quarter results were “nothing short of phenomenal” and that its full-year results were strong despite the challenges of operating during a pandemic. Across the company’s banners, consolidated comparable sales grew a “record breaking” 9.5% in the fourth quarter while e-commerce sales grew 142%, he said.

Canadian Tire same-store sales grew 12.8%, with seasonal sales related to Christmas up 41% in the quarter, he said, while e-commerce sales surged 179%. Using stores to help fill online orders allowed Canadian Tire to increase its e-commerce capacity faster than some others, in the face of COVID-era demand, Mr. Hicks said. He added that this combination of physical stores and e-commerce will be a focus of the company’s capital spending in the future.

“Today’s more global e-commerce retailers can offer consumers everything. So customers aren’t lacking any choice when it comes to products, or places to purchase them,” Mr. Hicks said. “However, I think our biggest learning through COVID is that customers are expecting more than product or even free delivery. … Although customers love shopping online, I think COVID has demonstrated that what they really want is control: control over how and where they receive their orders.”

“While the first two quarters of the year were significantly impacted by the pandemic, the team drove outstanding results,” Hicks said, noting that the company ended the year with “outstanding operational and financial results.” 

The decision to close National Sports is part of Canadian Tire’s strategy to increase efficiencies and focus on core assets, Hicks said. “It’s a smaller banner for us, for sure, but the decision to close the business is a matter of focus,” Hicks told investors. “There’s always been a fair amount of overlap with this banner and both SportCheck and (Canadian Tire).”

In addition to a density of physical stores, he said there is an overlap between e-commerce capabilities as well. An evaluation of the company’s portfolio as part of its operational efficiency program with an “investor mindset” led to the decision to close the stores, Hicks said.

National Sports, which carries sportswear, shoes and gear, was launched in 1968 as National Gym Clothing Ltd., according to its website. The company said stores will close between now and the end of June.

Meanwhile, Canadian Tire said its net income attributable to shareholders totalled $488.8 million or $7.97 per diluted share for the quarter ended Jan. 2. The result was up from $334.1 million or $5.42 per diluted share in its fourth quarter a year earlier.

Revenue was $4.87 billion, up from $4.32 billion. On an adjusted basis, Canadian Tire said it earned $8.40 per diluted share, up from $5.53 a year earlier. The company was expected to post $6.69 per share in adjusted profits on $4.83 billion of revenues, according to financial data firm Refinitiv.

Canadian Tire’s strong fourth-quarter results underscore the company’s “unique positioning for Canadian consumers,” Irene Nattel, an RBC Dominion Securities Inc. analyst, said in a note to clients. For the full-year, its net income attributable to shareholders totalled $751.8 million or $12.31 per diluted share on $14.87 billion of revenues, compared with $778.4 million or $12.58 per share on $14.53 billion of revenues in 2019.

Source: Globe and Mail
Source: Toronto Star

Walmart Beat Revenue and Sales Expectations in its Fourth Quarter

Walmart reported stronger-than-expected fourth-quarter revenue and sales results, driven by strong e-commerce growth that spiked during the COVID-19 pandemic. However, the company’s stock dropped as investors digested Walmart’s warning about potentially weaker sales in the coming year, as well as the costs associated with a pay hike for its frontline workers.

Here are the results versus the estimates, according to Bloomberg:

  • Adjusted EPS: $1.39 v. $1.50 estimate
  • Revenue: $152.1 billion billion v. $148.39 billion
  • Walmart U.S. comp-store sales (excluding gas): 8.6% v. 5% estimates
  • Walmart U.S. e-commerce sales: 69%

During the fiscal 2021 year, Walmart reported total revenue of $559.2 billion, up $35.2 billion, or 6.7% from a year ago. For the quarter, the closely-followed same-store sales figure came in at 8.6% in the U.S., versus estimates of 5% growth. Sales were spurred by the continued boom in electronic commerce, which grew 69% from a year ago in the quarter.

The closely-followed same-store sales figure came in at 8.6%, ahead of expectations on a “robust” holiday season and an uptick in January because of the U.S. stimulus checks. In the U.S., transactions declined 10.9% in the quarter as customers made fewer trips, while the average ticket jumped 21.9% as shoppers stocked up during those visits.

In terms of merchandise, grocery sales posted high single-digit comparables, as stores increased their hours and saw better in-stocks. Food sales were strong across categories, while household chemicals and paper products continued to show strengths. Walmart’s grocery pickup and delivery saw record-high sales volumes again in the quarter as customers shift toward e-commerce options.

The pharmacy also saw its comp sales growth in the mid-single digits, while general merchandise posted low double-digit growth. The general merchandise category performance benefitted from customers looking for comfort, leisure, and recreation across electronics, sporting goods, toys, and outdoor living. 

In its fiscal 2022 full-year guidance, Walmart said it expects U.S. same-store sales, excluding gas, to grow in the low-single digits. It also expects consolidated net sales growth to be up in the low single-digits.

“Assumptions in the guidance are dependent upon the duration and intensity of the COVID-19 health crisis globally, timing and effectiveness of global vaccines, the scale and duration of economic stimulus, employment trends and consumer confidence,” Walmart noted.

At the Investment Community Meeting on Thursday, CFO Brett Biggs said he expects the FY22 quarterly profit growth cadence versus the prior year “to be quite variable,” citing COVID-19-related expense and profit timing as well as international transactions.

The CFO said the retailer expects its Q1 operating income “to be relatively flat to last year, and EPS to be flat to slightly up,” reflecting the presence of Asda in its financials for about half the quarter, and some tax rate fluctuations. Due to the timing of FY21 costs and divestitures, Q2 and Q3 operating income and EPS may be down mid to high single digits, with Q4 operating income and EPS potentially up mid to high single digits, Biggs added.

“Again, and I probably can’t stress this enough, we’re in a very unusual time, causing projections even in the short-term to be very challenging and open to significant fluctuation,” Biggs said.

The retail giant also announced pay increases for approximately 28% of its hourly store associates. The average U.S. wage is now above $15 per hour. Walmart associates “stepped up to serve our customers and members exceptionally well during a busy holiday period in the midst of a pandemic. Change in retail accelerated in 2020. The capabilities we’ve built in previous years put us ahead, and we’re going to stay ahead,” Walmart CEO Doug McMillon said in a statement in the retailer’s fourth-quarter earnings results.

Doug McMillon also said that it is retooling its business to better serve customers, tap new revenue streams and create a diverse ecosystem of services, from delivering groceries to people’s fridges to offering annual health checkups and new kinds of financial services. It’s also bulking up its advertising business. 

McMillon said it will step up investments to adjust to the significant ways the pandemic has transformed the retail business. For example, he said Walmart will spend on automation to speed up the number of curbside pickup orders it can fill. Walmart’s e-commerce business has had dramatic gains, but it has not yet turned a profit. However, Biggs said its e-commerce margins continue to improve.

Walmart is the nation’s largest private employer with 1.5 million associates. In September, the retailer boosted wages for 165,000 of its workers., However, shares of Walmart tumbled 4.5% in the pre-market session, down from February 17th’s close at $147.50.

Source: Yahoo Finance
Source: CNBC

Home Depot Beat Expectations for the Fourth Quarter but Did Not Provide Guidance for 2021 Due to Uncertainty Surrounding the Pandemic

Home Depot Inc. posted stronger-than-expected fourth quarter earnings on February 23, thanks in part to a surge in same-store sales, but declined to offer a 2021 profit forecast amid the ongoing pandemic uncertainty.

Home Depot said earnings for the three months ending on February 1, the company’s fiscal fourth quarter, were pegged at $2.65 per share, up 16.22% from the same period last year and five cents ahead of the Street consensus forecast. Group revenues, Home Depot said, rose 25.3% to $32.3 billion, again topping analysts’ estimates of a $30.61 billion tally.

Same store sales, Home Depot said, rose 24.5% from last year, smashing the Refinitv forecast of an 18.8% advance, but noted that the “uncertainty related to the duration of the COVID-19 pandemic and its influence on the consumer” limited its ability to offer a full-year profit forecast. It also said COVID-related expenses would come in at $250 million for the full year.

“The team demonstrated ongoing flexibility to operate effectively in a very challenging environment and deliver record-breaking sales and earnings. Our ability to grow the business by over $21 billion in fiscal 2020 is a testament to both the investments we have made in the business as well as our associates’ unwavering commitment to our customers,” said CEO Craig Menear. “We continue to lean into these investments because we believe they are critical in enabling market share growth in any economic environment.”

DIY trends continue

About a year into the pandemic, Americans are still investing heavily in their homes, the company said. Customers bought supplies for do-it-yourself projects, gravitated toward new products like cordless tools and extended the outdoor season with patio furniture and grills in the fourth quarter, Home Depot COO Ted Decker said on a call with analysts and investors. He said consumers also shopped early and spent more on holiday decor, as they sought some degree of normalcy.

Customers spent more when they visited the company’s stores or its website. Home Depot said the value of a customer’s average purchase rose nearly 11% to $75.69, from a year earlier. Sales per square foot jumped 24% to $528.01. Many bought big-ticket items, such as appliances, vanities and vinyl plank flooring, Decker said. He said transactions of over $1,000 were up by about 23% year over year.

Digital sales increased about 83% in the fourth quarter compared with a year earlier, Home Depot CEO Craig Menear said. They grew about 86% for the full-year compared with the year prior, he said, with about 60% of those online orders fulfilled through the store. He said by adding online workshops, Home Depot expanded its audience and got customers more engaged. It had an average of five in-store workshops per month prior to the pandemic. Now, he said, it has about 40 online livestreaming workshops per month.

Tough comparisons ahead

Home Depot faces tough comparisons in coming quarters because of the big numbers it put up during the pandemic. One bright spot, however, could be a potential resurgence of home professionals’ businesses, as consumers feel more comfortable inviting people into their houses and paying for projects they put off or couldn’t tackle on their own.

Decker said larger pro customers have told Home Depot that their business is picking up and they have a backlog of jobs. About 45% of Home Depot’s sales come from pros, such as plumbers, electricians and contractors, with the rest coming from do-it-yourself customers. That’s a higher percentage than rival Lowe’s, which gets 20% to 25% of its sales from pros.

Home Depot is looking to build on that advantage with HD Supply. It acquired the former unit of the company and large industrial products distributor in a deal valued at $8 billion. It said its fourth-quarter results were hurt by pretax expenses of $110 million, or 9 cents per share, tied to the deal.

Menear said Home Depot will continue to invest in integrating its e-commerce and brick-and-mortar business, with capital expenditures targeted at about 2% of sales in the coming year. By continuing to invest, he said the company has been able to attract new customers and win more of their business, particularly Millenials who are buying and fixing up their homes.

Source: MSN Money
Source: CNBC

Lowe’s Reports Strong Fourth Quarter Financial Results 

Fourth Quarter Financial Highlights 

  • Lowe’s said fourth-quarter same-store sales climbed 28.1%, as consumers spent more on home projects during the pandemic.
  • Same-store sales climbed 28.1%, outpacing estimates that called for a 22% gain.
  • Net sales rose to $20.31 billion, outpacing analysts’ expectations of $19.48 billion.
  • Sales at its U.S. stores open at least a year and online grew by 28.6% in the quarter.
  • Earnings per share: $1.33 adjusted vs. $1.21 expected.
  • Revenue: $20.31 billion vs. $19.48 billion expected.
  • Lowe’s reiterated its prior forecast, which says spending on DIY projects and home improvement could ease as consumers resume normal activities post-pandemic.

Even with the strong results, Lowe’s continues to expect that sales could moderate as the pandemic eases. Lowe’s reported fourth-quarter net income of $978 million, or $1.32 per share, up from $509 million, or 66 cents per share, a year earlier. 

‘Not an anomaly’

Lowe’s has gained customers and gotten a boost in sales during the pandemic. The global health crisis also struck at a time when the retailer was in the middle of a turnaround effort, which has included a website redesign, supply chain investments, store improvements and a plan to win the business of more home professionals, such as contractors and electricians.

CEO Marvin Ellison said its soaring sales throughout the year reflect those strategic decisions, not just stay-at-home trends. “We believe that 2020 was not an anomaly,” he said, adding that it plans to gain market share even as the pandemic wanes.

In the fourth quarter, Ellison said the company saw high demand across the board. Sales grew 16% in all merchandising departments and more than 19% in all regions of the country. Online sales grew by 121%.

Accelerating sales growth

Chief Financial Officer Dave Denton said Lowe’s quickly pivoted from the holidays to special events focused on home organization and bath to continue to drive sales in January. He said growth of sales online and at stores open at least a year in the U.S. accelerated each month of the quarter, with 23.8% in November, 28% in December, and 35.7% in January. The company said momentum has continued in February.

Lowe’s, however, reiterated its previous forecast and cautioned home improvement demand will taper off in the months ahead. He laid out three scenarios for a robust, moderate or weak market. In a robust market, the retailer’s outlook for 2021 anticipates a 5% to 7% drop in demand for the home improvement sector on a mix adjusted basis. In a moderate and weak market, demand would likely drop respectively by 7% to 9% and 10%.

Even in a weak market, Denton said, the retailer is poised to improve its operating margins. He said as sales moderate with do-it-yourself customers, they may pick up with home professionals — a smaller part of Lowe’s customer base, but one that it’s looking to grow.

On a call with investors and analysts on February 24, Denton said trends currently point to the robust market scenario. The scenario predicts that Lowe’s sales for the year would be around $86 billion — a drop-off from its net sales of approximately $89.6 billion in 2020.

Holding on to new customers

Jefferies analyst Jonathan Matuszewski said he is betting on the company’s robust market scenario, too. He said more consumers have gotten comfortable with taking on do-it-yourself projects, a pattern they will likely repeat. “We believe the entry of new Americans into the world of DIY projects builds the case for Lowe’s as they lap challenging comparisons in F′22,” he said in the research note. “Additionally, we think investors underappreciate the sense of accomplishment DIYers felt from newly-acquired skills during the pandemic and what that implies for propensity to tackle future (more complex) projects.”

Fading pandemic trends could test whether Lowe’s has lasting loyalty among its newer customers, too. Neil Saunders, managing director of GlobalData, said consumers are starting to return to old habits, like going to stores they prefer instead of ones that are closer or more convenient. As that happens, he said Lowe’s could lose some shoppers to larger retailer and competitor, Home Depot.

Both retailers are likely to see higher costs for as long as the health crisis lasts. In its earnings report, Lowe’s said it spent more than $100 million in the fourth quarter and more than $900 million for the year on additional Covid-related pay and benefits for employees. It said it spent nearly $1.3 billion in pandemic-related expenses, including higher wages and store safety measures in the fiscal year.

The company said it spent $3.4 billion on share buybacks and paid $452 million in dividends in the fourth quarter. As of closing on February 23, Lowe’s shares were up nearly 35% over the past year. The company’s market value is $123.53 billion.

Source: Yahoo Finance
Source: Market Watch
Source: CNBC